Afl Amos Right
At right, Aflac CEO Dan Amos. Image source: Aflac.

The health-insurance business has gone through a lot of changes in recent years, but Aflac (NYSE:AFL) has always been a little bit different from its peers. Unlike UnitedHealth Group (NYSE:UNH), which offers standard health insurance that has to meet federal guidelines and coverage requirements, Aflac's supplemental products are generally seen as extra benefits. Moreover, Aflac has the majority of its exposure outside the U.S., thanks to its extensive business in Japan. Coming into Monday's fourth-quarter financial report, Aflac investors were nervous that the company might report weak results similar to how it did three months ago. But Aflac managed to give investors a nice positive surprise on both the top and bottom lines. Let's take a closer look at how Aflac did and what's ahead in 2016 for the insurance company.

Aflac gets earnings heading higher
Aflac's fourth-quarter results were better than most had expected, even though they were mixed in terms of direction. Revenue dropped 3.5% to $5.32 billion, but that was actually better than the $5.21 billion consensus forecast among investors. Similarly, net income edged higher by about 4% to $730 million, and adjusted operating earnings of $1.56 per share were $0.09 better than most shareholders had expected to see.

Looking more closely at the numbers, one thing Aflac investors should take special note of is the fact that the yen's weakness against the dollar is starting to have less of an impact on the company's results. The exchange rate was again worse than it was this time last year, but the spread narrowed to less than 6% this quarter, from 114.44 to 121.54 yen per dollar. That amounted to just a $0.05-per-share hit to operating earnings during the quarter.

Still, the dollar explained much of the difference in segment performance within Aflac. The Aflac Japan unit saw local-currency net premium income edge upward by 0.3%, but in dollar terms, that figure dropped 5.6%. Sagging sales of new annualized premium products, as well as falling revenue from third-sector cancer and medical products, hurt Aflac's results. By contrast, the so-called first-sector sales of child-endowment and similar products climbed nearly 16% during the quarter.

In the U.S., Aflac saw a 2.3% rise in premium income, and pre-tax profits were up 18% from year-ago levels. Increased sales, net investment income, and profit margins all contributed to the bottom-line gains from the U.S. division.

CEO Daniel Amos was quite pleased with Aflac's performance. "I'm encouraged that the changes we made to our career and broker management infrastructure over the last 18 months are laying the foundation for expanded long-term growth opportunities," Amos said. The CEO also noted the importance of the Japan Post partnership to its sales performance across the Pacific.

What's ahead for Aflac?
Investors need to be aware of some of the headwinds that will hit Aflac in 2016. Amos noted that it expects sales of third-sector products in Japan to continue to slump, with decreases expected in the mid-single-digit percentages throughout 2016. Nevertheless, with encouraging sales of key products, Aflac expects long-term growth of 4% to 6% there. In the U.S., Aflac has even higher hopes, looking for 3% to 5% new annualized premium growth for 2016 and a long-term growth rate above the 5% mark. Those are figures that UnitedHealth would be pleased to get from its health-insurance segment, and UnitedHealth has largely looked to its Optum business to generate faster growth in light of challenges presented by the Affordable Care Act on health insurance offerings generally.

Aflac continued to repatriate its Japanese profits, clearing even greater amounts of money than it expected. The insurer expects to keep paying its dividend and to repurchase about $1.4 billion in stock during 2016, continuing its efforts to reduce share counts. As for its guidance, Aflac expects earnings of $6.17 to $6.41 per share in 2016, assuming that the dollar-yen exchange rate remains relatively stable.

Aflac shareholders seemed content with the results, sending the stock up 1.5% in after-hours trading following the announcement. Now that the yen looks like it might stop falling, Aflac is in position to get more of its growth onto its financial statements in 2016 and beyond.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Aflac and UnitedHealth Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.